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Note: All tax information contained in this article is as of the publication date. Be aware that tax rules are always subject to change, and the IRS website is your official source for the latest forms and guidance.
529 plans are commonly referred to as “college savings plans,” so it’s easy to think the money can only be used to pay for qualified college or university expenses. But did you know that they can also be used to help cover qualified education costs at other types of institutions outside of a traditional college setting?
Read on to learn about other ways you could use a 529 plan.
While a four-year college degree has long been the traditional path for many students after high school, there are other post-secondary education options beyond college that your child can pursue with the help of a 529 plan.
These options may include eligible trade schools, apprenticeship programs, or associate degree programs.
You can use your 529 plan at an eligible accredited post-secondary institution to help pay for qualified education expenses such as tuition, fee, books, supplies, etc. Generally speaking, an eligible institution is one that participates in the US Department of Education’s federal student aid programs.
You can check with the Department of Education or contact the school directly to find out if a particular vocational institution or program is eligible.
Good to know: If your kids are interested in studying abroad, you may be able to use your 529 plan for certain international study programs at eligible foreign educational institutions. Be sure to check with the program administrator to confirm eligibility details.
If you have a 529 plan, one important thing to remember is that you’re allowed to change the beneficiary on the account.
So for whatever reason, if post-secondary education just isn’t in your child’s plan for the future at all, consider changing the beneficiary to another qualified family member—for example, this could be the original beneficiary’s siblings. You can get a change of beneficiary form by contacting your 529 plan administrator.
Good to know: Changing the beneficiary may sometimes trigger a “tax event” (this means you may end up paying taxes or penalties just for making the change). Generally speaking, if the new beneficiary is a family member of the original beneficiary, there are no tax consequences for making the change.
For more information, see IRS Publication 970 or talk to your tax advisor if you have questions about your specific situation.
You also don’t have to wait until college to use the funds in a 529 account. The money can also cover qualified K-12 tuition expenses (up to $20,000 per year).
However, there are many tax considerations and implications to using a 529 plan for K-12 education, so talk to your financial or tax advisor to make sure you understand the potential benefits and drawbacks.
Know a family member who is still trying to chip away at their student debt? You may be able to help out.
You could use a 529 plan to help repay qualified student loans—up to $10,000 per beneficiary (and each of the beneficiary's siblings).
Talk to your plan administrator or tax advisor to understand the rules of using a 529 plan for student loans.
When you have kids, you tend to put their needs first. But let’s say they earn a full scholarship and won’t be using the money in the 529 plan. You could consider making yourself the account beneficiary and use the funds to go back to school—whether it’s to advance your career with a new degree or simply pursue a personal interest.
However, before making any beneficiary changes, it’s a good idea to speak with a financial advisor or your 529 account administrator to understand the eligibility rules.
This article is for informational purposes only and is not a substitute for individualized professional tax advice. Individuals should consult their own tax advisor for matters specific to their own taxes. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendations in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements of any information contained in this document and any liability therefore is expressly disclaimed. You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any format without the express written consent of Goldman Sachs. This foregoing restriction includes, without limitation, using, extracting, downloading or retrieving this information, in whole or in part, to train or finetune a machine learning or artificial intelligence system.
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